Do Computers Boost Productivity?
BY ANDREW LEONARD | In the church of the
digital revolution, perhaps the most sacred tenet is
the belief that computers increase productivity.
Personal productivity, entrepreneurial
productivity, Gross National Product productivity:
You name it, computers are supposed to enhance
it. Even better, once those computers are all linked
together in a great big network, the sky's the limit.
Computers and networks, we are told, have
ushered in the era of the "new economy" -- an age
of boundless wealth and prosperity. As Wired
Magazine declared last summer in its
self-described "radically optimistic" "The Long
Boom" cover story, "We are watching the
beginnings of a global economic boom on a scale
never experienced before. We have entered a
period of sustained growth that could eventually
double the world's economy every dozen years
and bring increasing prosperity for -- quite literally
-- billions of people on the planet."
And we owe it all to computers. Or do we? The
truth may be quite different.
In March, financial journalist Jeff Madrick, author
of "The End of Affluence" and former finance
editor at Business Week, painted a quite different
picture in a lengthy New York Review of Books
essay. Madrick is writing a book on productivity,
and he's spent a lot of time crunching numbers.
His article makes a compelling case that computer
technology, at least so far, has yet to significantly
increase productivity. On the contrary, he argues,
computer technology may actually be slowing the
rate at which productivity grows. Access to
information, says Madrick, has so leveled the
competitive playing field that people are more
important than ever before. In the real "new
economy," talent will be at a premium, just as it
was in the pre-industrial revolution past, when
individual artisans ruled the economic roost.
Madrick's essay is packed with a close review of
productivity figures and statistics. Salon decided to
cut to the chase and catch up with Madrick at his
Manhattan office, where he alternates working on
his new book (due out in 1999) with his job as
editor of Challenge Magazine, a bimonthly journal
devoted to economics and public policy.
When you discuss the "new economy" in your
New York Review of Books essay, your
argument could easily be taken as a direct
rebuttal of Wired's "Long Boom" story. Were
you familiar with that article?
I read it. It was quite fanciful. It's a profession of
faith. It's not based on serious analysis. They are
essentially talking about what may happen, and I
keep asking the question, "Why hasn't it happened
yet?" And I don't think they have a good answer
for that, except for "These things take a long
time." Well, that can't pass for intellectual
analysis. It's conjecture.
Would you say the same is true for the whole
concept of "the new economy"? That it's
nothing but conjecture?
No, I think there is a new economy. What I don't
think is that it's going to result in the same kind of
productivity growth that the old economy
generated. I don't deny that something significant
has changed. What I disagree with, and what often
upsets me, is the presumption that because
something has changed, and because it is
technologically exciting, it will therefore
automatically produce rapid economic growth.
That is simply not true. It may not produce rapid
economic growth, and there is good reason to
believe it will produce slower economic growth
than the past.
Why is that? Are you saying that computer
technology slows productivity gains?
I think that's true. In the '50s, '60s and early '70s,
America grew because it was the champion of the
standardized product. Everybody bought the same
product. And in the age of mass production, you
could increase productivity very quickly if you
could sell more of that product through economies
of scale and economies of distribution and size.
But by the '70s, consumers were pretty satiated
with the same product and they started to want
variety. So corporations learned how to make a
variety of products more inexpensively, to fill ever
smaller market niches.
How do computers fit into this?
Computer technology really assisted in the
creation of variety -- computerized inventory
management and computer-driven manufacturing
processes allow you to change very quickly, to
very rapidly manufacture a different kind of
product. But an economy that offers all kinds of
products [as opposed to a mass production-based
economy] emphasizes innovation, not only in
terms of what kind of product you make, but also
in the marketing of the product, the financing of
the product and the delivery and distribution of the
product.
We've now become an economy that needs an
enormous amount of innovation. And you cannot
computerize innovation. The great irony is that
computerization has made some kinds of tasks
very productive, and has eliminated the need for
people in production lines -- but in the process
computers have made it so efficient to reach the
consumer with new products that the consumer
then demands a level of constant innovation that
can only be supplied by people.
But wouldn't the moguls of Silicon Valley turn
around and say, that's why the age of the
network is so great -- because it facilitates the
process of taking a new idea or innovation and
transforming it into a marketable product?
The more people who connect to the network,
the better it is for everyone.
I think that is true. I'm not arguing that the
computer hasn't made things more efficient. It has
made things much more efficient. The best way I
can put it is that when information is so available
to people, it becomes less valuable. What becomes
more valuable is what you do with that
information. Computerization has made access to
information extraordinarily available. But what
matters, what makes money, is what you do with
that information, what kind of product you come
up with, how you innovate. And that increasingly
requires people. In the past just having
information gave you a competitive advantage.
Now having the information no longer gives you a
competitive advantage. The only competitive
advantage is creative input.
And creative input is expensive. In your
Review essay you write that "the modern
economy, I would argue, may be returning to a
high-technology version of a crafts economy,
based on worker skills, thinking, and
inventiveness, rather than on the muscle of
large scale factories and distribution
networks." Is that what you mean when you
talk about "creative input" as "the only
competitive advantage"?
I think one has to understand how extraordinary
mass production once was. It created an
enormous amount of productivity with relatively
little creative input. It did not need people. You
needed people on the assembly line, but you didn't
need much creative input. What you needed was
this massive organization and huge size. It created
enormous productivity. Now you need engineers
and consultants and designers -- that's where the
value added is, and that's costly. The point is not
that we are less productive now than we were
then. We are much more productive than we were
in 1929, or 1950. But our productivity is not
advancing as rapidly as it once did. And, in my
view, a big reason for this is that the economy
now requires creativity, and you can't computerize
creativity.
What are the implications of this?
Well, if we're balancing things out, on the one
hand we have more interesting jobs, and more
interesting products, more fulfilling jobs and more
fulfilling products. But we have slower growing
income, and the nation has to learn to deal with
slower growing income, and that is very hard to
do. America was built on fast-growing income --
the American society, our ideology and social and
political institutions, were built on fast-growing
income.
And that's not true anymore?
I think there's an illusion in Silicon Valley and
Wall Street and Washington that people are doing
great. But incomes have not risen for most people,
or if they have, they've risen very slowly, and
families only get by because the spouse now
works. Medical costs have risen way faster than
average income, and the cost of private education
and higher education has also risen way faster.
Are there enough educated, talented people to
satisfy the demand that this kind of "new
economy" has?
Do I think there are enough creative people?
Undoubtedly. I think the long history of
civilization shows that there has only been one
problem. It is not lack of ability, it is lack of
opportunity for the ability that exists. Obviously
genius and talent is always scarce, because you
can always use more of it -- there is never a
sufficient amount of it. But there is an awful
amount of talent in America that has gone
untapped, I assure you. We have to do something
about enabling disadvantaged people to have
access to decent education.
How do we tap that talent? Is this a job for
government or for the free market?
My predilection is strongly in favor of government
action, because it will equalize benefits. A market
approach will make it more of a two-tier approach
than it already is. There are some benefits to a
market approach, I will grant, but I think overall it
is the government's province to do this.
I'm not that optimistic that we will do what's
necessary, however. I'm only saying that
something can be done. But I'm not so sure that it
is in the American character to do it. We've
always had abundance and rapid economic
growth, so we didn't have to think about it very
much. We could support our educational
requirements and our social programs because
people's incomes kept going up. Now incomes are
not going up, or they are going up rather slowly,
except for a selected number of people. We may
not have the will or the vision to do what is
necessary. I would say in fact that the odds are
against it.
SALON | April 24, 1998